Cash influxes into municipal bond mutual funds accelerated last week as investors increasingly recognized the relative safety and value of state and local government debt.
During the week ended Feb. 4, investors poured $758.2 million into muni funds that report weekly figures, according to AMG Data Services.
This was the biggest inflow since May and the fifth straight week of positive cash flow. Muni funds closed out 2008 with 15 consecutive weeks of outflows.
Among all municipal funds, including those that report monthly, total assets have rebounded to $36.13 billion from $33.69 billion on Dec. 18. That reflects both inflows and market appreciation.
Last week saw inflows into more kinds of funds.
California funds reported their first inflow since September. Flows into funds for states like New York, Massachusetts, New Jersey, and Virginia picked up. Funds devoted to Maryland enjoyed their biggest inflow since early September.
Funds devoted to government debt in Florida were the only type of fund to report outflows last week, according to the Arcata, Calif.-based fund tracker.
High-yield funds, which suffered devastating outflows most of December, have reported steady inflows since the beginning of this year.
The flood of cash into muni funds mirrors a recent rally in most corners of the tax-exempt market, especially for high-quality, short-term debt.
The yield on 10-year triple-A rated munis has compressed two percentage points since mid-October, according to Municipal Market Data.
Segments of the market punished more severely at the height of the crisis also have recovered, though not to the same extent. Yields on 30-year triple-A rated paper and 10-year single-A rated bonds have sunk more than a percentage point since December.
"It's a function of the relative value of munis compared to other things and relative safety compared to other things," said Evan Rourke, a portfolio manager at Eaton Vance.
Stocks plunged 40% last year and are down further this year. Conversely, the resulting flight to safety rendered Treasuries too expensive, he said.
People have recognized munis as a good balance of stability compared to stocks and value compared to Treasuries, Rourke said.
